Australian bonds are generating the strongest demand in three years on speculation the central bank will win room to hold record-low interest rates as Treasurer Joe Hockey’s first budget focuses on deficit reduction.
Japanese investors overseeing $47 billion say the Aussie’s strongest rally in five months is a false dawn, as a slowdown in China’s factories overshadows signs of strength in the South Pacific economy.
A sale today of Australian government bonds due in 19 years, the longest maturity for outstanding debt not linked to inflation, drew the most bids at any auction in almost four months and was snapped up by six buyers.
Australia’s benchmark 10-year government bond yield dropped to a one-month low before Federal Reserve Chairman Ben S. Bernanke begins a second day of testimony following remarks that signaled no imminent exit from stimulus that has helped inflate asset prices across the world.
Australia sold its longest-maturity government bond since 1984 with investors purchasing more than twice as much as in any previous offering and the government locked in yields at about a 2 1/2-year low.